Vietnam's five-year bonds had a second weekly advance on speculation lower funding costs and easing volatility in the dong will encourage investors. The currency weakened.

The overnight interbank deposit rate fell 1.82 percentage points this week to 2.34 percent, the biggest slide since the five days ended March 23, according to data compiled by Bloomberg. A measure of the dong's 60-day historical volatility has fallen to 3.37 percent from this year's high of 6.53 percent in April, according to data compiled by Bloomberg.

Vietnam's monetary policy, which focuses on "gradually reducing and stabilizing interest-rate levels and keeping the exchange rate stable, will continue to be the main force attracting" bond investors in the second half of 2012, analysts at Hanoi-based BIDV Securities Co., a unit of Bank for Investment & Development of Vietnam, wrote in a note today. "Banks' demand to hold bonds is still gradually increasing."

The yield on the benchmark five-year note fell seven basis points, or 0.07 percentage point, to 9.88 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong fell 0.1 percent this week to 20,868 per dollar as of 3:30 p.m. Friday in Hanoi, according to data compiled by Bloomberg. The currency gained 0.1 percent on Friday. It is allowed to trade as much as 1 percent on either side of a daily reference rate, which has been kept at 20,828 per dollar since Dec. 26, according to the central bank's website.